While all eyes were on the landmark Browning-Ferris decision issued Thursday, the Board issued yet another split decision that also may have far reaching consequences. In GVS Properties, LLC, 362 NLRB No. 194 (Aug. 27, 2015) (here), a case of first impression, the Board in a 2-1 decision held that a purchaser employer becomes a Burns successor with an obligation to recognize and bargain with the Union when, as required by a local worker retention law, it has to hire the predecessor employer’s employees for a “trial period.”

The purchaser employer, GVS, had acquired several real estate properties in New York City and decided to insource maintenance work that had been contracted out to a unionized contractor. The city’s Displaced Building Service Workers Protection Act (DBSWPA) required that GVS, as the successor, retain the maintenance employees for a 90-day transition employment period (or at least as many of those it needed to perform the work). GVS set initial terms and hired 8 of the 9 predecessor employees in accordance with the law. The union demanded recognition, but GVS refused on the grounds that it would not employ a substantial and representative complement of employees until after the expiration of the 90-day transition period when it would be free to decide whether to keep the predecessor’s employees. In this case, after the 90-day period GVS fired three of the old employees and brought on 4 new employees, meaning a majority of the post-transition period work force were not former union employees. GVS had no obligation to recognize the union under its theory.

The Board majority found that GVS became a successor under NLRB v. Burns International Security Services, Inc., 406 U.S. 272 (1972), at the point it assumed control of the predecessor’s business and hired, pursuant to the DBSWPA, a majority of its workforce from among the former employer’s employees for the transition period. The primary dispute between the parties was whether it was possible for an employer to become a successor under Burns during a period of time when it had no legal choice as to whether to retain the predecessor’s employees. GVS and dissenting Member Johnson argued that, based on the Supreme Court’s decision in Fall River Dyeing v. NLRB, 482 U.S. 27, 40-41 (1987), a buyer becomes a successor under Burns only if it does so voluntarily, i.e., if it makes a “conscious decision” to hire a majority of the predecessor’s employees, for in such a case it “intends” to take advantage of the predecessor’s workforce. When a worker retention statute mandates that a purchasing employer retain the predecessor’s workforce for a period of time, the employer does not retain the employees voluntarily and thus Burns is inapplicable. As such, GVS and Member Johnson argued the Burns test could only be applied upon the expiration of any state mandated employment period, after the employer could freely choose whether and how many of the predecessor employees to retain.

The Board majority disagreed, claiming that GVS made its “conscious” decision to have a majority of its workforce consist of predecessor employees when it purchased the buildings in a locale subject to the DBSWPA. The majority further analogized the situation to prior cases where the Board found succesorship to apply when buyers were required to retain the predecessor’s employees as part of the purchase agreement, or when employees were hired on a probationary basis. The majority believed that the NLRA’s aim to preserve industrial peace was best served by considering GVS to be a successor when the employees were hired as required by law as opposed to delaying employee bargaining rights until the end of the statutory transition period.

The dissent further argued that the Board’s decision likely would nullify all local worker retention statutes, for the courts would find them preempted by the NLRA given that states and local governments effectively could use such laws to force purchasing employers to recognize unions. Indeed, in Rhode Island Hospitality Ass’n v. City of Providence, 667 F.3d 17 (1st Cir. 2011), the court refused to find preempted a worker retention ordinance requiring a successor hospitality employer to retain the predecessor’s workforce for three months because the court relied in part on the assumption that, under Burns, a successor employer likely would not be forced to recognize the union during three month mandatory employment period. The court specifically acknowledged that, if it was wrong, and the NLRB decided otherwise, the issue would be open to relitigation. Member Johnson stated that if local governments can control successorship decisions that are supposed to be voluntary, then the notion of federal supremacy will be turned on its head. The majority recognized the possibility of preemption, but did not view it as a sufficient reason to rule differently.

At this point, however, the Board majority has not gone the extra step of declaring a purchaser in such a situation to be “perfectly clear” successor required to adopt the predecessor’s contract. “We do not, as the dissent suggests, imply–much less hold–that all new employers subject to worker retention statutes are ‘perfectly clear’ successors, and we are not ‘obliterat[ing]’ the Burns right of successor employers to set their employees’ initial terms.” Employers subject to worker retention statutes can avoid “perfectly clear” successor status by announcing new terms and conditions of employment prior to or simultaneously with the expression of intent to retain their predecessors’ employees.

This decision, unless overturned, will have far reaching impacts. Many localities have local worker retention statutes, meaning prospective purchasers will have no choice but to recognize the predecessor employees’ union if requested even if, ultimately, only a minority of the workforce post-retention period consists of predecessor employees.  For example, California just passed a far reaching law that applies to all  grocery store purchasers and requires the purchaser to retain the prior owner’s employees for a period of ninety (90) days.  See California AB 359 (signed into law August 17, 2015).   Moreover, courts can no longer sidestep the preemption question on worker retention statutes by assuming the successorship determination would not be made until after the expiration of the mandatory retention period. Last but certainly not least, even though the majority appeared to recognize that a purchasing employer in a worker retention state that set initial terms would not be a “perfectly clear” successor, that issue was not technically before the Board and thus, the majority’s comments are simply dicta. Member Johnson fears such an employer could be found to be a perfectly clear successor.